Stocks with high short interest can be of interest to investors looking for short and long strategies alike. On the bear side, high short interest represents widespread pessimism about the stock. But bullish investors should take a look as well: stocks with high short interests often experience a "short squeeze" rally on the first sign of good news.
Here are three stocks that have high short interest but generally positive fundamentals, with notably strong growth. Are they worthy of being shorted, or are they unfairly beaten-down candidates that might rally? It's up to you to do your own research and decide.
Herbalife is another one of those stocks that cratered when David Einhorn (one of my investing idols) showed up on the company's 1Q conference call. As the WSJ puts it, "silence is golden, especially if that sound of silence is David Einhorn not bashing your company."
Herbalife sells weight management, nutritional supplements, energy, sports and fitness products and personal care products through a network of approximately 2.7 million independent distributors in 79 countries (except China, where the Company sells its products through retail stores). Herbalife has a market cap of $5.9B.
Herbalife's short interest is 11.10%, but the financial metrics make me question whether this is justified. Herbalife has a market cap of $3.6B.
- Year-on-year EPS growth is projected at 15%
- Next year's EPS growth is projected at 14%
- Cash flow is neutral, growing at 0.05% on a TTM basis
- The P/E looks fairly reasonable, at 14.6
- The PEG is hovering around 1.
Verifone Systems (PAY)
VeriFone is in the business of secure electronic payment solutions. It provides point of sale (POS) solutions and services for the financial, retail, hospitality, petroleum, transportation, government, and healthcare vertical markets.
Verifone's short interest is 12.38%. Is this justified? The statistics seem to say no:
- P/E looks reasonable, at 15.8
- Year-on-year EPS growth is projected at 38.5%.
- Next year's EPS growth is projected at 22%.
- Cash flow growth on a TTM basis is 1.42%.
- Verifone's PEG ratio is about 0.5.
Nu Skin Enterprises (NUS)
Nu Skin Enterprises develops and distributes anti-aging personal care products and nutritional supplements in 52 markets worldwide. NuSkin's market cap is $3.1B. Short interest is 12.6%, but the statistics seem to suggest NuSkin's future isn't all that terrible:
- Year-on-year EPS growth is projected at 14%
- Next year's EPS growth is projected at 12%
- Cash flow grew at 0.3% on a TTM basis
- P/E is fairly reasonable at 16.9
- Nu Skin's PEG ratio is a little high (1.3), but not exorbitantly so.
Disclaimer: I am an individual investor, not a licensed investment advisor or broker dealer. Investors are cautioned to perform their own due diligence. All information contained within this report is presented as-is and has been derived from public sources & management. Always contact a financial professional before making any major financial decisions. All investments have an inherent degree of risk. The future is uncertain, and actual results may be materially different from those expected. Past performance is no guarantee of future results. All views expressed herein are my own, and cannot be interpreted as the views of my employer(s) or any organizations I am affiliated with. Presentation of information does not necessarily constitute a recommendation to buy or sell. Never make any investment without conducting your own research and reading multiple points of view.